WTO Framework: A Road map to Catastrophe

A joint statement issued by farmers, fishers, workers, NGOs, and concerned individuals in the Philippines campaigning against further trade liberalization.

The proponents of trade liberalization have hailed the framework agreement that emerged from the General Council Meeting of the World Trade Organization in Geneva on 1 August 2004 as an important step towards jump starting stalled multilateral trade talks and the completion at the soonest possible time of the “Doha Round.”

United States Trade Representative Robert Zoellick has called the framework, a road map to prosperity. The Philippines has joined the celebratory chorus. Trade Secretary Cesar Purisima expressed elation over the framework, saying that many of the positions advanced by the Philippines in the negotiations were reflected in the framework agreement. A close reading of the text however shows that the outcome in Geneva is definitely no cause for celebration especially for a developing country like the Philippines. The WTO framework is flawed. It will not address but instead further aggravate the imbalance in world trade in favor of the rich countries. It is a road map not to prosperity but catastrophe for developing countries like the Philippines.

Development for whom?

The framework sets the stalled Doha Round negotiations back on track. The Doha Development Agenda (DDA) provided the mandate for new negotiations on agriculture, services, industrial tariffs, and the so-called Singapore Issues. The new negotiations that began in Doha in 2001 has been referred to as a development round because it claims to address among others, the implementation issues raised by developing countries.

But what the Doha Development Agenda is really about is further liberalization not just in agriculture, but services and non-agricultural products as well. DDA is more about prying open new markets for the rich rather than redressing the imbalance in world trade. The only development that the DDA secures is that of the already rich and powerful countries.

Protection for the strong

The framework further aggravates this imbalance. The text is crystal clear when it comes to protecting the interest of the developed countries and so conveniently vague when it comes to accommodating the demands of the developing countries.

In the agriculture negotiations, which remains the most contentious by far, the central issue is the failure of the trading superpowers- mainly the United States and Europe- to comply with their commitments to reduce their huge subsidies to their agriculture sector. The US and EU subsidizes their agriculture to the tune of around $70-80 billion each.

The framework agreement gives a go-signal to the United States and Europe to continue their huge subsidies to agriculture. The text, which allows an expansion of the blue box category of minimally trade-distorting support, legitimizes the box-shifting tactics of the United States. The US has been demanding an amendment to the blue box provision to allow its counter-cyclical payments to its farmers under the notorious US Farm Bill 2002. This redefinition will allow the US to shift some $9-10 billion dollars from the Amber Box to the Blue Box. The EU has Blue Box subsidies amounting to 14.31 billion euro.

Adding insult to injury, the text even provides for flexibilities to members with
“exceptionally large percentage” of trade-distorting support in the Blue Box, to ensure that a member is not called upon to make a wholly disproportionate cut.” (Para 15 of Annex A: Framework for establishing modalities in Agriculture)

The framework for Non-Agricultural Market Access (NAMA) resurrects the Derbez text that was already rejected by Members in Cancun. The July text calls for comprehensive coverage without a priori exclusions and sets the basis for a formula for tariff reduction and binding tariffs that will cause further injury to the already ailing industries in developing countries.

The text directs members to bind 100 percent their non-agricultural tariff lines and prescribes a formula that will bind still un-bound tariffs at a rate twice that of MFN applied rates in base year 2001. For a country like the Philippines, with a tariff coverage for industrial products not exceeding 50 % and where applied MFN rates are already low, with no tariffs exceeding 35 %, this is a sure formula for disaster.

The fisheries sector, a sector considered sensitive to the Philippine economy because of the millions of fishers dependent on it for livelihood, has been included in NAMA. The tariff rates of local fishery products ranged from 10-15 percent in 2001, twice these rates mean 20-30 percent starting tariff rates. These rates cannot provide ample protection to a sector that is already drowning from so many threats and pressures on its resource base.

Lip Service for Developing Country Concerns

The text dealing with the demands by developing countries for Special and Differential Treatment (S&D), for flexibilities for sensitive and special products (SP) remains vague. The language does not go any further than saying that all of these concerns will be noted in the negotiations. That is to say that what developing countries got out of the framework on S&D and SP are no more than empty promises. Furthermore, as in the case of provision on sensitive products, the flexibilities are allowed not just for developing countries who gravely need them, but are afforded to developed countries as well.

An Unjust Process

The process that gave birth to the flawed framework is an unjust process, fraught with the usual bullying and intimidation tactics by developed countries. Prior to the meeting in Geneva, in fact immediately after the collapse of the talks in Cancun, the proponents of free trade have already made painstaking efforts to put the agenda of programmed and rapid trade liberalization back on track.

The failure to consolidate a new trade deal under WTO only strengthened the resolve of the United States and Europe to push forward their trade liberalization agenda at all cost through bilateral, regional, and or multilateral trade agreements.

In the lead up to the meeting, the United States have used all sorts of tactics to intimidate, pressure, and lure members to accede to its demands. The US for example announced just a week before the July meetings its sugar quota allocation for 40 countries including the allocation of 142,160 metric tons for the Philippines. Was this the sweetener that enticed the Philippines to support the framework?

The framework has been projected as a consensus of the 147 members of the WTO. In reality however, the process was much more exclusionary.

The negotiations for agriculture were held only among a small group of five countries (called the non-group of five or NG5) which included the US, EU, Australia and two of the most influential members of the Group of 20-Brazil and India. The second draft of the framework was written by Tim Grosser the chairperson of the Committee on Agriculture based on the NG5 discussions. The second draft was then discussed by a group of around 20 countries in a green room process. The outcome was a draft endorsed by the 20 countries. This draft was then presented to the other groups. By this time, the pressure to accede was at its strongest with endorsement already secured from the major players.

Conclusion

The WTO framework is unjust. It is a framework that protects the interests of trade superpowers like the US and EU by further aggravating instead of addressing the imbalance in the global trading system. The framework provides ample leverage and flexibility for rich countries to consolidate and further corner the benefits from trade at the expense of the rest of the world. In contrast, what developing countries got are empty promises once again.

The so called consensus in Geneva over the framework for WTO trade negotiations is unacceptable. We reject this framework and demand accountability from the Philippine government for this tragic mishap.